What Uber and Lyft get right

A couple of months ago, Yves Smith penned a column suggesting that Uber is headed for a crash. She calls the company a “textbook ‘bezzle’ — John Kenneth Galbraith’s coinage for an investment swindle where the losses have yet to be recognized,” points to sizable losses, argues that “[n]o ultimately successful major technology company has been as deeply unprofitable for anywhere remotely as long as Uber has been,” thinks its initial public offering valuation is ridiculous, and complains that it conceals financial information—in her view, a huge red flag.[1]

I am poorly placed to argue with any of the foregoing, but when Smith critiques Uber in comparison to taxi companies,[2] she runs right up against my many years of experience with the latter business, in which I have worked as a driver, a dispatcher, and a order taker.

In addition, I’ve worked for Uber and Lyft on and off for a little over two years. So, having done both taxi and ridesharing driving, how do the two gigs compare?

First, as a taxi driver, I had a lot less flexibility in my work schedule. I had to commit to shifts and if I didn’t show up for those shifts, there was an excellent chance I would still owe the lease fee or “gate” for those shifts. Owe, you might ask, with your eyes growing wide?

Yes, owe. As a taxi driver, even when I owned my own cab, I owed for dispatch and insurance. When I leased the cab, I was also paying, obviously, for the car, which the company maintained poorly, and this was one reason I purchased my own cab. All this meant I started out each shift owing a significant amount of money.

That would be one thing, but I owed that money regardless of whether I showed up, and regardless of how much business there was to be had. At the time I drove cab, the gate ranged from something like $70 to something like $110 for a 10-hour shift. When I leased a cab on a weekly basis with a San Jose company, that was something like three or four hundred dollars.

I rarely made much. $100 on a 10-hour shift was about par, even in the San Francisco Bay Area. In the 1990s, this was enough to pay rent at a single room occupancy hotel (SRO residents are typically considered ‘homeless’ or, at best, marginally housed). After the dot-com crash, business fell through the floor, but there were a lot more cabs on the road—the companies make their money by putting cars on the road, regardless of how much business there is—and my earnings were a lot more meager.

I don’t owe money when I start a day with Uber or Lyft and I am spared that stress, but my earnings remain low. Even as a progressive consensus forms around a $15 per hour minimum wage, ridesharing drivers average $10 per hour or below.[3] That means I’m working pretty much continuously—the term of art is a “total situation”—all the time, with limited ability even to consider alternatives.

But there are distinct advantages to Uber and Lyft for a driver over the taxi driving experience. As already noted, I control the maintenance on my car, I don’t owe money for a shift, and I have more flexibility in my schedule. There’s more.

As a taxi driver, when I got a long trip, I had to “deadhead” back to where I was an authorized taxi. That’s because taxis are regulated locally. So if I drive in San Francisco, I’m only authorized to pick up in San Francisco and at the San Francisco International Airport. If I drive on the San Francisco peninsula, I’m only authorized to pick up in those local jurisdictions where I have obtained a permit.

Uber and Lyft, by contrast, are regulated by the state. I can—I don’t always choose to—pick up wherever in California I have my car. If I get a long trip, I don’t have to “deadhead” back; I can usually keep working right where I end up.

It happens there are a couple places in California I don’t drive. One is San Francisco, which has always been hostile toward people who drive for work. As an Uber or Lyft driver, I have no choice about pickup locations, and sometimes that means picking up in an illegal location, like a bus stop. So all San Francisco’s Municipal Transit Agency (MTA) has to do is, say, park at the head of a bus stop by a movie theater, and they can write tickets all night long as movies let out and patrons call for Ubers and Lyfts. What’s more, according to one of my passengers, the agency has a team targeting Uber and Lyft drivers. This team was almost certainly one source for the San Francisco Police Department’s claim that ridesharing drivers account for about two thirds of all traffic violations downtown.[4] (The other place I don’t drive is Sonoma County, where I live, because I find passengers here are too interested in drinking to get drunk, conflating this with sociability. Drunks are often obnoxious in multiple ways and may throw up in my car.)

But it is my choice to deadhead back from Sonoma or San Francisco counties (I usually focus on Marin County, in between). When I get a ride to the peninsula or the East Bay, I continue right on working.

Another problem in the taxi business is with fragmented dispatch. Taxi companies either have to have their own dispatch services (most do) or contract with an operation that supplies dispatch. (I’m starting to see the latter a lot in San Francisco.) Trouble arises when too many people call, say, the large companies, which quickly get overwhelmed, particularly during rush hour and special events, but available cab drivers either are in the wrong place or working for a small company. In San Francisco, people reliably complain they can’t get taxis, but I will never forget driving down 17th Street from Twin Peaks on a slow night: Ahead of me there were cabs as far as I could see. Behind me were cabs as far as I could see. All of us were empty, hungry, desperate. We’re out whether or not it’s busy, paying for ten hours at a time.

Uber and Lyft overcome this because there are only the two companies and drivers can work for both. The companies can pull cars across county lines (a complication with my determination to avoid San Francisco and Sonoma pickups), even across toll bridges, as needed. If I’m not getting rides with one company, I’ll turn on the other company’s app, then go offline with whichever company fails to give me a ride first. It never has to be that I’m stuck working for the wrong company or even in the wrong location that night. And if it’s really slow, I can just go home. I’m never stuck trying desperately to make my gas and gate and I haven’t committed to a ten-hour shift.

Finally, with Uber and Lyft, the only time I’m dealing with cash is when a passenger chooses to tip me in cash (this is uncommon). That means I’m never short of change as when a series of passengers, each having gone to an ATM, paid me in $20 bills on taxi fares that were each considerably less.

I can’t take street hails as an Uber and Lyft driver. That’s a taxi function. But overall, my experience as a ridesharing driver is vastly improved over my experience as a taxi driver.

That’s not to say there aren’t problems. One, frankly, is that Uber and Lyft are looking to put me out of business with self-driving cars. Uber, in particular, has been cutting too many corners as it views a failure to succeed in developing autonomous vehicles as an existential threat. In general, it’s unclear when self-driving technology will be ready for prime time,[5] but it’s even more unclear what I’ll do when it is and it’s not like I’m able to save up a hefty nest egg in the meantime.[6] Also, as Smith noted, there are a lot of unanswered questions about how especially Uber can survive.[7] But it isn’t like there’s no value to this business model over that of the taxi business.